OFFICE MEMORANDUM

NO. DG/MAN/357
ISSUED BY AUTHORITY OF DIRECTOR GENERAL, CPWD

NIRMAN BHAVAN,NEW DELHI DATED: 04.10.2017

Sub:- Modification to various Sections of CPWD Works Manual 2014 – Sections 13, 15, 23, 29, 33
and 35

Certain amendments to the CPWD General Conditions of Contract 7/8 2014 have been
issued vide DG/CON/297 dt. 04.09.2017 so as to bring these in alignment with the law and make
the provisions more equitable. Accordingly the following modifications are made to various
sections of CPWD Works Manual 2014.

Sl. Existing Provision Modified Provision

No
1. 13.1 What is a contract? 13.1.1 What is a contract?
(1) When two or more persons have a (1) An agreement which is enforceable by law is a
common intention communicated to "Contract." According to Section 10 of the
each other to create some obligation Indian Contract Act, 1872, only those
between them, there is said to be an agreements are enforceable by law which are
agreement. An agreement which is made by the free consent of parties
enforceable by law is a "Contract." competent to contract, for a lawful
(2) According to Section 10 of the Indian consideration and with a lawful object, and are
Contract Act, 1872, only those agreements not expressly declared to be void. Legal
are enforceable by law which are made obligations arise only with an agreement
by the free consent of parties competent with legal intentions. Hence all contracts are
to contract, for a lawful consideration agreements but all agreements are not
and with a lawful object, and are not contracts.
expressly declared to be void. This is
subject to any special law according to
which a contract should be in writing and
attested by witnesses.
(3) The following are the essential
ingredients of a contract:-
(a) Offer made by one person called the
"Promisor".
(b) Acceptance of an offer made by the
other person called the "Promisee".

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 (c) Doing of an act, or abstinence from
doing a particular act by promisor for
promisee, that is called consideration.
(d) The offer and acceptance should relate
to something which is not prohibited by
law.
(e) Offer and acceptance constitute an
agreement, which when enforceable by
law, becomes a contract.
(f) In order to make a valid and binding
agreement, the party entering into such
an agreement should be competent to
make such agreement.
2.
No contract shall be made by a subordinate
authority that has not been directed or
authorized to do so by or under the orders of
the President in terms of Article 299 (1) of the
Constitution. The President should be made a
party to every contract of the Government and
the words "for and on behalf of the President
of India" should follow the designation
appended below the signature of the officer.
(Shifted from 23.1(3 & 4)
(4) For the purpose of an agreement, there (2) For the purpose of an agreement, there must
must be a communication of intention
between the parties thereto. Hence in
the forms of a contract there is:
(a) A proposal
(b) Communication of the proposal
(c) Communication of acceptance of
13.1.2 Requirements of Government
Contracts-
(1) (a) Government contracts must satisfy not
only the requirements of the Indian Contract
Act, 1872 but also Article 299 of the
Constitution of India. CPWD contracts are in
the exercise of the executive power of the
Union of India, which requires the contract
shall be expressed to be made by the
President and shall be executed on behalf of
the President. “Expressed” means “in words
oral or written”. Since the contract is also to
be executed, it has to be in writing. Any
central government contract which does not
satisfy above Constitutional requirement is
void ab-initio.
(b) No contract shall be made by a subordinate
authority that has not been directed or
authorized to do so by or under the orders of
the President in terms of Article 299 (1) of the
Constitution and the words "for and on behalf
of the President of India" should follow the
designation appended below the signature of
the officer.
be:
(a) A proposal
(b) Communication of the proposal
(c) Communication of acceptance of
the proposal
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 the proposal
(3)
(5) The communication of acceptance of the (4)
proposal completes the agreement An
offer may lapse for want of acceptance or
be revoked before acceptance. Acceptance a.
produces something that cannot can be
recalled or undone A contract springs up b.
as soon as the. offer is accepted and
imposes an obligation upon the person
making the offer. It has been opined by the
Ministry of Law that before communication
of acceptance of an offer, the tenderer
would be within his right to withdraw, alter
and/or modify his tender before its
acceptance, unless there is a specific
promise to keep the offer open for a
specific period, backed by a valid
consideration.
c.
(5)
(d) Consideration
The call of tender is an invitation to get offer
or proposal. When the tenderer makes his
offer it is a proposal. Any modification in the
offer or proposal would constitute a counter
offer and the original offer would cease to
exist for acceptance, but if the counter offer
is accepted an agreement would be formed.
Hence no counter offer may be made by the
Engineer in Charge in response to an offer.
Seeking clarification does not make a
counter offer.
The communication of acceptance of the
proposal completes the agreement and the
proposal becomes a promise.
The acceptance must have a consideration to
make a valid agreement.
An offer may lapse for want of acceptance or
for lapse of time and can even be revoked
before communication of acceptance is
complete as against the proposer, but not
afterwards. An acceptance can be revoked
before communication of acceptance is
complete as against the acceptor, but not
afterwards. Thus before the original
acceptance letter reaches the proposer the
revocation of acceptance if reaches him by a
faster mode of communication, the original
acceptance letter becomes invalid. Such a
situation must be avoided and can only be
taken recourse to in rare cases for erroneous
acceptance. The contractor is bound by the
contract which is formed as soon as the
acceptance letter is put on transmission.
The requirement of submission of
performance guarantee is not a condition
precedent for formation of contract. Non-
deposit of performance guarantee shall
constitute a breach of contract. The
arbitration clause comes into existence in
CPWD contracts on acceptance of tender
before deposit of the performance guarantee
or signing of the GCC containing the
arbitration clause.
The contract is formed at the place where
communication of acceptance is completed. In
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 case of postal communication it is at the place
where the acceptance letter is put on
transmission. However, in case of
instantaneous communication e.g. by
electronic means, the communication is
complete at the place where it is received.
Hence the contract is formed at the place of
receipt of communication in case of
instantaneous communication and this gives
rise to jurisdiction in courts at such place. This
must be kept in mind while communication of
acceptance letter.
(6) As per recent judicial precedents in India
though the proposer can withdraw his offer
before the prescribed period in the proposal
to keep the proposal open, the earnest money
deposited if any, can be forfeited as per the
terms of NIT.
3. No provision 13.1.3 General
(1) Though the Indian Contract Act governs the
law of contract in India (except the State of
Jammu and Kashmir) it does not purport to
contain the whole law of contract. It does not
affect the provisions of any Statute, Act or
Regulation not expressly repealed in the Act.
It also does not affect usage or custom of
trade, nor any incident of contract, not
inconsistent with the provisions of the Act.
Hence the provisions of the contract create
legal obligations unless these are inconsistent
with the Indian Contract Act, 1872. The
mandatory provisions of Contract Act cannot
be derogated in the contract. Every
agreement of which object or consideration is
unlawful is void as per Sec. 23 of the Indian
Contract Act, 1872. Usage or custom of trade
cannot be presumed and need to be proved
on evidence before Arbitrator or Court. A
contract which is formed unfairly due to
misrepresentation or fraud is voidable at the
option of the innocent party with the remedy
as per law. Such option may not be available
once the innocent party has the knowledge of
the same and still affirms the contract. A
voidable contract is valid till avoided.
(2) The obligations of the parties out of contract

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4. 15.9 Preparation of Notice Inviting Tenders
(7) The time period for completion of work
should be reasonable at decided by NIT
approving authority, keeping in view the
quantum of work, requirement of user
department, geographical conditions of the
site and other constraints. The Schedule of
contract period as given in Appendix 17
may act as a rough guideline.
(Shifted from 29.14)Guidelines for fixing of
milestones for building projects
The milestones are to be mentioned in
schedule F of GCC 2014 under clause 5. The
arise not only from the express terms of
contract but also from the terms implied on
facts i.e. which are so obvious that go without
saying and obligations implied in law.
Obligations that the law implies also depend
on the type and nature of contract. Hence
when express provision in the contract
provides a time for the contractor to perform,
there is an obligation implied in law, even if
not so expressly provided in the contract, that
the Department performs its reciprocal
obligations to enable the contractor to
perform in the specified manner and time.
This is a positive obligation. In addition the
Department should not do anything to
prevent the contractor from performing his
obligation as per the contract. Exceptions may
be made to such implied obligations in a
contract with specific remedy.
(3) The contract must be treated seriously by
either party for performance and not for
breach. Breach of contract may entitle the
innocent party to claim of damages.
Obligations must be clearly understood - both
expressed or implied and those imposed by
law. Clauses of contracts should be
interpreted accordingly. The parties are also
bound by the judicial precedents.
15.9 Preparation of Notice Inviting Tenders
(7) The time period for completion of work as
decided by NIT approving authority should be
reasonable, keeping in view the quantum of
work, requirements of user department,
geographical conditions of the site and other
constraints with due consideration to the
availability of site and design in phases if any
as well as the technical requirements and
particular site conditions and other factors
possibly affecting the work, but with
recorded reasons. The Schedule of contract
period as given in Appendix 17 may act as a
indicative guideline.
(12) The milestones are to be mentioned in
schedule F of GCC 2014 under clause 5. The
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maximum amount that is to be withheld in
case of non achievement of milestones shall
be 5% of tendered value of the work. (Shifted
from 33.5.2) The physical milestones are to be
described in the table of milestone. There are
no guidelines for deciding the physical
milestone. It is difficult to prepare a guideline
for deciding the physical milestone in view of
different nature of work being executed by the
department but broadly following guidelines
can be followed for building projects:
(i) Multistorey single building.
(a) Residential Building
The physical milestone may be fixed based
on the different stages of construction. One
milestone should be made for sample flat
either on ground floor or first floor.
Provision of penalty for non achievement
of sample flat milestone should be made
on per day or per week basis. The item of
flooring, fixing of doors and windows
(order of procurement of doors and
windows) are critical items for start of
internal electrical works. These items
may be made one of the milestones.
Internal and external finishing works can
also be made one of the milestones.
maximum amount that is to be withheld in
case of non achievement of milestones shall
be 5% of tendered value of the work. The
physical milestones are to be described in the
table of milestone. The Milestones should, as
far as possible, be fixed considering the
critical activities for optimal use of the
resources and activities for completion of
work in minimum time, unless sectional or
part completion is necessary. For works
costing more than the power of SE for
acceptance of tenders, a CPM based Activity-
Time Programme (CPM-ATP), indicating, in
addition to all activities of the contractors of
various packages, all foreseeable activities
such as handing over Site, designs and
drawings, statutory approvals, payments,
other services required for completion and
occupation shall be prepared. The stipulated
time and Milestones shall, preferably derive
from the CPM-ATP so finalised.

(b) Non Residential Building

The physical milestone may be fixed based
on the different stages of construction.
One milestone should be made for toilet
block either on ground floor or first floor.
Provision of penalty for non achievement
of this milestone should be made on per
day or per week basis. The item of
flooring, fixing of doors and windows
(order of procurement of doors and
windows) are critical items for start of
internal electrical works. These items
may be made one of the milestones.
Internal and external finishing works can

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 also be made one of the milestones.

(ii) Number of buildings in one campus

The physical milestone may be fixed based on Deleted
the horizontal as well as vertical stage of
construction. One milestone can be further sub
divided in numbers equal to number of buildings.
These milestones can be decided by staggering
the activities in different blocks/building for
giving leverage to the contractor in respect of
skilled labour of different trades can be shifted
from one building to another building
efficiently.
One milestone should be made for sample flat
in each category of flats either on ground floor
or first floor in case of residential building and
for toilet block in case of non residential
buildings. Provision of penalty for non
achievement of sample flat/toilet block
milestone should also be made on per day or
per week basis.
The item of flooring, fixing of doors and
windows (order of procurement of doors and
windows) are critical items for start of internal
electrical works. These items may be made one
of the milestone. Internal and external finishing
works can also be made one of the milestone.
(iii) Other Important Points
(a) The possibility of provision of financial Other Important Points
milestones may be seen and included along (a) Wherever uncertainties in physical milestones or
with physical milestone and provision of critical path are high, financial milestones may be
achievement of one of them may be made provided instead.
in the NIT.
(b) In big projects, the provision of
milestones mentioned in the NIT should (b) In big projects, the milestones mentioned in
be necessarily discussed in the prebid the NIT should be necessarily discussed in the
conference and genuine and positive pre-bid conference and valid suggestions from
suggestions from the bidders should be the bidders should be accepted and
incorporated in the minutes of meeting as corrigendum to the NIT made.
well as corrigendum in the NIT.
(c) The provision of milestones such as
complete RCC, complete brick work, (c) The provision of milestones such as “complete”
complete finishing, etc. should not be RCC, “complete” brick work, “complete” finishing,
made as these milestones are not etc. should not be made as even a minor
achieved 100% due to site constraints. hindrance could lead to non-achievement and
blocking of funds.
(d) One milestone should include completion of a

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Shifted from 29.1 (5)The necessity of making (13) The necessity of making provision of
provision of milestones in schedule F shall be
adjudged by NIT approving authority for
maintenance works and works of shorter
duration.
5. 15.9 Preparation of Notice Inviting Tenders
No Provision
6. 23.1 General principles and guidelines
(3) No contract shall be made by a (3) For requirements of Government Contracts
subordinate authority that has not been
directed or authorized to do so by or under
the orders of the President in terms of
Article 299 (1) of the Constitution.
(4) The President should be made a party to (4) Deleted
every contract of the Government and the
words "for and on behalf of the President
of India" should follow the designation
appended below the signature of the
officer who is authorized in this behalf
under Article 299 of the Constitution and
who is executing the contract.
7. 23.1 General principles and guidelines
(7) "Cost Plus" contract should be avoided Deleted
except where they are inevitable and prior
sample (flat in residential buildings, toilet block
for Non Residential Buildings, etc.) at a location
where it can be completed early.
milestones in schedule F shall be adjudged by
NIT approving authority for maintenance
works/specialized works and works of
shorter duration.
15.9 Preparation of Notice Inviting Tenders
(14) The arbitration clause i.e. clause 25 in the
GCC 7/8 is for domestic arbitration. In case
any foreign party is permissible as contractor
clause 25 needs to be suitably amended by
the NIT issuing authority clearly providing
for seat of arbitration, governing law of
contract and the governing law of arbitration
agreement; as it shall be an international
commercial arbitration. Also care has to be
taken regarding the enforcement
mechanism in the country where the assets
of the contractor would be w.r.t. seat of
arbitration where award shall be made as
per New York Convention, 1958.
(15) Necessary corrections should be made in the
GCC by the NIT issuing authority based on
whether there is a Superintending Engineer
or not in the project headed by CPM.
23.1 General principles and guidelines
section 13 may be referred.
23.1 General principles and guidelines
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 written approval of Director General has
been obtained.
Explanation: A "Cost Plus" contract means
a contract wherein the price payable for
supplies or services under the contract is
determined on the basis of the actual cost
of production of the supplies or services
rendered plus profit either at a fixed rate
or unit or at a fixed percentage on the
actual cost of production.
8. 29.1 General Principles 29.1 General Principles
(1) At the time of issuing Notice Inviting Deleted
Tenders for a particular work, the
Engineer-in-charge should specify the time
allowed for completion of the work
consistent with the magnitude and
urgency of the work.
(2) The time allowed for carrying out the work (1) The time allowed for carrying out the work as
as entered in the contract shall be strictly entered in the contract shall be strictly
observed by the contractor, and shall be observed by the contractor and the work shall
reckoned from the .....th day (as be proceeded with all due diligence on the
mentioned in the NIT) after the date on part of the contractor throughout the
which the letter of acceptance is given to stipulated/extended period of the contract
the contractor. (performance in time being deemed to be the
essence of the contract).
The Accepting Authority shall ensure that
various functionaries of the Department
invariably perform their obligations so as to
not prevent performance by the contractor
and hence shall ensure that they are ready
with all the requirements to be supplied to the
contractor, at the time of acceptance of
tender or later as per requirement of progress
of work. This shall be the responsibility of the
Tender Accepting Authority.
(3) The work shall be proceeded with all due Deleted
diligence on the part of the contractor
throughout the stipulated period of the
contract (time being deemed to be the
essence of the contract).
(4) To ensure good progress of the work (2) To ensure good progress of the work during
during execution, the contractor shall be execution, the contractor shall be bound, in all
bound, in all cases, in which the time cases, in which the time allowed for any work
allowed for any work exceeds one month exceeds one month (save for special job), to
(save for special job), to complete the complete the work as per the milestones given
work as per the milestones given in in Schedule 'F' given under clause 5 of the

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 Schedule 'F' given under clause 5 of the contract, or as per the rescheduled milestones.
contract, or as per the rescheduled
milestones. However, for special jobs, if a
time schedule has been submitted by the
contractor and the same has been
accepted by the Engineer-in-charge, the
contractor shall comply with such time
schedule. (Provisions under para 33.5 of
this Manual may also be seen).
(5) The necessity of making provision of Deleted
milestones in schedule F shall be adjudged
by NIT approving authority for
maintenance works and works of shorter
duration. (Added vide OM DG/MAN/278
dt. 11.6.2013)
9. 29.2 Requirements of clause 5 29.2 Operation of extension of time, levy of
Clause 5 of CPWD Forms no. 7 and 8 and compensation and determination of contract
Clause 4 of CPWD Form no. 9 empower the for non-performance in time-
Engineer-incharge to grant extension of time
for the completion of the work on certain
conditions. He can exercise such powers if the
following conditions are satisfied:
(i) The contractor must apply to the
Engineer-in-charge in writing for
extension of time.
(ii) Such an application must state the
grounds that hindered the contractor in
the execution of the work within the
stipulated time.
(iii) Such an application must be made within
14 days of the date on which such
hindrance arose.
(iv) The Engineer-in-charge must be of the
opinion that the grounds shown for the
extension of time are reasonable.

(Shifted from 29.13(2)) After submission of

application for rescheduling of
milestones by the contractor in (1) Extension of time shall be granted and
prescribed proforma with supporting milestones rescheduled by the competent
documents, only one comprehensive authority strictly as per the terms of the
observation shall be made if necessary. contract. Engineer in Charge shall submit the
Engineer in Charge to submit the rescheduling proposal within 2 weeks from the
rescheduling proposal within 2 weeks date of receipt of proposal. Authority under
from the date of receipt of proposal. Clause 5 for revision of milestones shall decide
the rescheduling proposal in 2 weeks of

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Sanctioning authority shall decide the
rescheduling proposal in 2 weeks of
receipt of proposal, failing which it will
be deemed that Rescheduling of
milestones have been approved.
(MAN/347 dt. 13.04.2017)
(2) The competent authority in Schedule F of
(3) The contract can be determined even within
receipt of proposal. The Engineer in Charge
shall promptly decide any extension as per
clause 12 and 15 and intimate the contractor
and the authority for extension of time under
Schedule F. The justified extended time shall
be promptly and firmly decided throughout
the work and actual progress monitored with
reference to the same. If the extension
entitled for extra work under clause 12
cannot be fully and properly assessed before
completion of the work, this should be
assessed on the work nearing completion.
Such extra time, if any, is to be added to the
extension of time granted earlier and notified
by the Engineer in Charge before final action
under clause 2. All extensions of time shall
be with a firm date as per due assessment on
record while giving such extension and in no
case there shall be any provisional extension
of time.
clause 5 should grant fair and reasonable
extension of time even if the contractor fails
to apply, but as per the terms of the contract
in clause 5.2 and 5.3; thereby fixing the
justified extended date for performance of
the work by the contractor.
In case there is any prevention by the
Department, such authority should invariably
and promptly grant extension of time under
the relevant provision in the clause, even if
the contractor fails to apply, however making
the point of non application by contractor
clear in the letter of extension of time. This
should be based on recommendation by the
Engineer-in-Charge on the basis of relevant
event recorded in the hindrance register. It
shall be the duty of Engineer-in-Charge to
bring such fact of prevention to the
knowledge of the authority in Schedule F
immediately and initiate immediate remedial
measures to avoid delay in work on such
account.
the original stipulated period of contact
under relevant provisions in clause 3 if the
Page 11 of 54
 contractor is in breach of contract including
failure to proceed with the work with due
diligence. When the work remains incomplete
on justified extended date and the contract
has not been determined under clause 3, the
Engineer-in-Charge should try to obtain a
programme from the contractor for
completion of work in a reasonable period
and grant such period as mutually agreed
making it essence for performance of work by
the contractor. This shall be with liability of
the contractor to pay compensation under
clause 2 of the contract for such extended
period which shall be made expressly clear in
the letter extending time as per clause 5.4 of
the contract.
In case the contractor does not give any such
programme and the contract has not been
determined under clause 3 for non-
completion of work in the justified extended
time, the Engineer-in-Charge shall fix a
reasonable time duly assessed on record in
writing for the balance work and shall issue
similar notice intimating the failure on the
part of the contractor to give any programme
to complete the work and making such time
as essence of the contact for performance by
the contractor with liability under clause 2
If the contractor proceeds with due diligence
and completes the work in such further
extended time, there would be no
determination of contract but there shall be
levy of compensation for delay under clause 2
as notified under clause 5.5 while extending
the time. However, if the contractor fails to
proceed with due diligence during such
extended date or fails to complete the work
on such further extended date, in addition to
action under clause 2 there can be action
under clause 3 as well. In such case the
Department need not wait in every case until
the expiry of the extended date for
determination of contract and the contract
can be determined before expiry of the
extended date by relying on the relevant sub-
clause of clause 3

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 (4) The powers and procedure for grant of
justified extension of time shall be as
provided in the contract. Time need to be
extended based on due evaluation of causes
listed in sub-clause 5.2 and 5.3 of the
contract. Hence first there has to be
determination of whether such causes are
relevant causes entitling the contractor to
extension. If the causes are not relevant i.e.
do not fall under any of the category listed in
clause 5.2 or 5.3, there can be no justified
extension of time for such causes. In case the
causes or the events causing delay in work
are relevant causes or events then there has
to be an objective assessment of the impact
of such causes on the final or sectional
completion date.
(5) Certain relevant causes or events may disrupt
the work and even entitle the contractor to
rescheduling of milestones, but not entitle
him to extension of time or entitle him to
extension of time only partially. However,
any relevant event affecting any critical
activity shall invariably entitle the contractor
to extension of time for its full impact even if
other non-critical activities are in progress
during such time. Hence the determination of
justified extension of time shall be purely
based on how relevant events impact the
critical activities. Such an evaluation should
be made considering the impact of the
relevant event on the planned and approved
programme of the contractor.
10. 29.3 Powers of officers for grant of extension29.3 Rescheduling of milestones
of time
The powers for grant of extension of time have The milestone amounts should be withheld and
been delegated to CPWD Officers as shown in released if due as per provision in the contract
Appendix-1 without any delay. The time period for
rescheduling by the competent authority as per
the contract should be followed scrupulously. In
case of prevention by Department, due care
should be taken for rescheduling milestones
before any action to withhold such money, as the
contractor may claim damages for such
withholding when the work is delayed by the
Department. Every milestone shall have its own

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 critical path as per the planned and approved
programme by the contractor. The impact of every
relevant event has to be considered on such
planned programme to reschedule the milestone.
11. 29.3A 29.3A
No Provision All the communication between Subdivision,
Division office and office of Authority under
Clause 5 w.r.t. rescheduling of milestones and
extension of time shall be through official mail. All
offices shall preserve electronic record of such
communication till finalization of bill and
resolution of dispute in Arbitration/ Courts, if any.
12. 29.4 Grant of extension of time without
application
(1) Based on the Hindrance Register where Deleted
adequate and proper grounds exist, the
Engineer-in-charge can grant extension of
time even in the absence of application from
the contractor under Clause 5.
(2) The extension, in order to be binding, will
have to be by the 'agreement' of the parties,
express or implied. It, therefore, follows that if
the extension of time is granted by the
Executive Engineer and such extension of time
is accepted by the contractor, either expressly
or implied by his action before and
subsequent to the date of completion, the
extension of time granted by the Executive
Engineer is valid. It is, therefore, necessary
that the Executive Engineer grants extension
of time provisionally even when the
contractor does not apply for extension of
time in order to keep the contract alive. If the
contractor refuses to act upon the extension
granted by the Engineer-in-charge, it will
attract the provisions of clauses 2 & 3 of the
agreement.
(3) The recovery of liquidated damages for
delayed performance, on account of which
extension of time is granted under clause 2, is
a distinct matter and would depend on:
(i) Prior notice as contemplated by Section 55
of the Contract Act, 1872.
(ii) Fault/delay/hindrance being ascribable to
the contractor, and
(iii) Proof of the loss occasioned thereby (in

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 case it is challenged by the contractor
before the Arbitrator).

13. 29.5 Form of application for extension of 29.4 Form of application for extension of time
time
The form of application for extension of The form of application for extension of time to
time to be submitted by the contractor has been be submitted by the contractor has been
standardized and is at Appendix 29. The standardized and is provided in the GCC 7/8
contractor is required to apply for grant of
extension of time on Part I of the Form, Part II
of the Form is to be used by the departmental
officers for the purposes of dealing with the
application for extension of time.
14. 29.6 Action on belated application for
extension of time
Although the contractor is required to seek Deleted
extension within 14 days from the date of
occurrence of hindrance for which the extension
is sought, it does not debar the grant of
extension sought later, as it is always competent
to a promise to waive a delay and accept
performance after the stipulated time. However,
the extraordinary concession should be refused
save in most exceptional circumstances, and for
very good causes shown for not seeking it within
the period of 14 days. The contractor has no right
to have this request for extension considered
where he has not applied for it in accordance
with clause 5 of the agreement.
15. 29.7 Recording of hindrances 29.5 Recording of hindrances
(1) Whenever any hindrance whether on (1) Whenever any hindrance whether on part of
part of department or on part of department as covered under clause 5.3 or
contractor comes to the notice of the events under clause 5.2 including those
Assistant Engineer, he should at once beyond the control of contractor causing
make a note of such hindrance in the delay in the work comes to the notice of the
register kept at site, and immediately Assistant Engineer, he should at once make a
make a report to the Executive Engineer note of such hindrance in the register,
within a week. electronic or kept at site, and immediately
make a report to the Executive Engineer
within a week by official mail.
(2) The Executive Engineer shall review the (2) The Executive Engineer shall review the
Hindrance Register at least once in a Hindrance Register at least once in a month
month. or during inspection.
(3) The proforma for the Hindrance Register (3) The proforma for the Hindrance Register
shall be as per Annexure. shall be as per Annexure.
(4) The following points should be kept in (4) The following points should be kept in mind

Page 15 of 54
 mind while entering the hindrances in while entering the hindrances in the
the Hindrance Register: Hindrance Register:
(i) The entry of date of start of hindrances (i) The entry of date of start of hindrances and
and date of removal of hindrances date of removal of hindrances should be made
should be made on the same day as the within 48 hours of the hindrances taking place
hindrances takes place or the cause of or the cause of the hindrances removed,
the hindrances is removed, respectively. respectively.
(ii) The Executive Engineer should work out (ii) The Executive Engineer should work out the
the over-lapping period, net period of rescheduling of milestone/s and extension of
hindrances and weightage of each time considering the events recorded in the
hindrances within 15 days of removal of hindrance register and the impact of relevant
the cause of hindrances. For works out events on the planned programme of the
side headquarters, this should be done contractor and forward the same to the
as and when he visits the site. Authority under Clause 5 for revision of
milestones or extension of time within one
week of receipt of the same from the
contractor.
(iii) The items of work affected due to any (iii) to (ix) Deleted.
hindrances should be clearly mentioned
in the Hindrance Register by the
Assistant Engineer, and the weightage
should be allowed on this basis.
(iv) Each hindrance should be entered in the
Hindrance Register, which should be
authenticated by the Executive Engineer
and Contractor.
(v) The hindrances on part of contractor is
also to be entered in the Hindrance
Register.
(vi) The hindrance should be recorded
carefully in the Hindrance Register after
considering its effect on completion of
work.
(vii) Review of hindrance register shall be
compulsory in division office by EE and
AAO at the time of payment of each
Running Account Bill and final bill and
certificate shall be recorded that all up
to date hindrances on part of
department and contractor have been
recorded in the hindrance register
(viii) The net delay on part of department or
contractor shall be worked out after
considering all the hindrances recorded
in the hindrance register.
(ix) The Superintending Engineer should

Page 16 of 54
 review the Hindrance Register whenever
he visit the site of work.
16. 29.8 Processing cases of extension of time
(1) The Assistant Engineer shall decide upon Deleted
the grant of extension of time within 15
days of the completion of work, if it is in
his competence to do so. Otherwise, he
shall forward the case with his
recommendations to the Executive
Engineer within 30 days of completion of
work.
(2) The Executive Engineer shall take a
decision within 15 days if it is within his
power to do so, or, otherwise, forward the
case to the Superintending Engineer with
his recommendations within this period.
(3) The Chief Project Manager/Project
Manager/Superintending Engineer should
then pass orders within 15 days of the
receipt of the extension case from the
Executive Engineer. If the orders of the
competent authority are not received in
time, Executive Engineer should extend
the contract before the stipulated date
actually expires so that the contract might
remain in force, but while communicating
this extension of time, he must inform the
contractor that this was without prejudice
to Government's right to levy
compensation under clause 2 of the
agreement.
(4) The sanction of extension of time will in all
cases be issued by the Assistant
Engineer/Executive Engineer under clause
5 of the agreement in the proforma shown
in Appendix 30A (Added as per
OM/MAN/221). The form provides that
the extension of time is granted without
prejudice to right of Government to
recover liquidated damages in terms of
clause 2 of the agreement. In all cases, a

Page 17 of 54
 copy of the letter granting extension of
time will be endorsed to the concerned
Audit/Accounts Officer. While doing so, it
should be made clear in the endorsement
whether the Chief Project Manager/
Project Manager/ Superintending
Engineer has decided to levy or not to levy
compensation or liquidated damages.
(Modified vide OM DG/MAN/255 dt.
7.12.2012).
(5) The decision in regard to levy of liquidated
damages for delay in the execution of
works in terms of clause 2 of the contract
Forms 7 and 8 (and corresponding clause
in other contract forms) should not be
recorded in the Measurement Book of
the concerned work.

17. 29.9 Extension of time without levy of

compensation
In the case where extension is granted Deleted
without levy of compensation (Performa
shown in Appendix (30) (Added as per
OM/MAN/221) after approval of the
competent authority, provision suggested in
the preceding paragraph should stand with a
view to safeguard the interest of the
Government, especially against unforeseen
circumstances.
18. 29.10 Compensation under clause 2 29.6 Compensation under clause 2
The word 'compensation' should be used in 1. The word 'compensation' should be used in
relation to clause 2 of the agreement in CPWD relation to clause 2 of the agreement in CPWD
Forms no. 7 and 8 and similar clauses in other Forms no. 7 and 8 and similar clauses in other
contract Forms instead of the word 'penalty' contract Forms instead of the word 'penalty'.
However, Courts or Arbitrators interpret such
provisions in contract in the context to arrive
at whether it is a penalty or a genuine pre-
estimate of damages irrespective of what is
mentioned in the contract. Though it is
provided as an agreed amount that the
contractor would pay as compensation, it is
essentially a claim of damages and is governed
by section 74 of the Indian Contract Act, 1872,

Page 18 of 54
29.11 Section 74 of the Indian Contract Act,
1872
(1) When a contact has been broken, and if a
sum is named in the contract as the
amount to be paid in case of such breach,
or if the contract contains any other
stipulation by way of compensation, the
party complaining of the breach is
entitled, whether or not actual damage
or loss is proved to have been caused
thereby, to receive from the party who
has broken the contract, a reasonable
amount not exceeding the one so named
or as the case may be the compensation
stipulated for.
2. If the work is completed in stipulated period
3. Extension of time cases must be decided
with liability of only reasonable
compensation, which provides-
When a contact has been broken, and if a
sum is named in the contract as the amount
to be paid in case of such breach, or if the
contract contains any other stipulation by
way of compensation, the party complaining
of the breach is entitled, whether or not
actual damage or loss is proved to have been
caused thereby, to receive from the party
who has broken the contract, a reasonable
amount not exceeding the one so named or
as the case may be the compensation
stipulated for.
It is necessary to interpret Section 74 in view
of judicial precedents in India and though
sometimes English authorities on liquidated
damages and penalties are relied before
judicial forums, the same are not applicable
exactly in India as per Section 74. The claim,
where it is of reasonable compensation is
likely to be upheld in every case. However, in
public works the loss may be intangible and
hence it is not possible to be proved
mathematically exactly in every case. Hence,
where the loss is intangible, unless the
stipulated sum is in the nature of penalty, the
sum named in the contract can be claimed and
need not be proved with actual loss. This must
be brought properly before the court or
arbitrator. It is also necessary to understand
that the party in breach in such case has the
burden of proof that no loss was suffered by
the other party (in this case, the Department).
Only when loss can be proved the party
claiming compensation has to prove the loss.
or time extended under clauses 5.2, 5.3, 12 or
15; no action under clause 2 will arise for levy
of compensation. Action under clause 2 to levy
compensation arises only when the progress
of work is not as per schedule including
justified extended time or the work remains
incomplete on such stipulated/extended date.
during progress of work as and when the
entitlement occurs as per clauses of contract
Page 19 of 54
 and not after completion of work. This may
involve granting extension of time on multiple
occasions in a contract. This would fix the
justified extended date. Non completion of
work by this date would make the contractor
liable to compensation under clause 2. The
notice for levy of compensation should
invariably be issued on or in the week
preceding the justified extended date, for the
work that remains incomplete. In case further
extension of time is given, in agreement with
the contractor, beyond justified date this shall
invariably entitle the Department to claim
compensation under clause 2. Procedural
compliance is essential for clause 2 action i.e.
fixing the justified extended date and notice
for claim of compensation while granting
further extension. When there are events
justifying extension of time towards the
completion of work and extension of time is
therefore required to be decided after
completion of work, the final extension of
time shall be decided as soon as possible of
occurrence of event/s and in any case within
the time prescribed in clause 5.4.1. In the
event of non application by the contractor, the
reasonable time mentioned shall be 60 days
from completion of work.
4. Clauses relating to Extension of time are
important for many reasons. Firstly these
clauses protect the contract from force
majeure events resulting in involuntary
discharge of contract by frustration. Provisions
for extension for reasons beyond the control
of contractor protect the contractor from
liquidated damages. Extension of time for
variation saves the liquidated damages clause
from becoming inoperative. Provision of
extension of time for prevention by the
employer saves the liquidated damages clause
from becoming invalid. Power to grant
extension of time by employer even without
request by the contractor, particularly for
employer induced delay is to protect the
liquidated damages clause. Hence the
operation of extension of time clause properly

Page 20 of 54
 is a necessary pre-condition for any action to
claim compensation for delay by contractor.
This must be taken utmost care by the
concerned officers.
(2) According to clause 5 of the agreement,
all letters of extension of time to be issued
to the contractor should be over the
signature of the Engineer-in-charge, as
he is the only officer so empowered
contractually to grant extension of time.
Similarly, all letters intending to impose 5. All letters intending to impose compensation or
compensation or to recover liquidated liquidated damages under clause 2 of the
damages under clause 2 of the agreement agreement should be issued over the signature
should be issued over the signature of the of the authority under Schedule F, as he is the
Superintending Engineer, as he is the only officer competent to do so under clause 2
only officer competent to do so under of the agreement, in order to fulfil contractual
clause 2 of the agreement, in order to obligation. Notice to adjust or set off
fulfil contractual obligation. compensation from dues to the contractor
shall be notified by the Engineer-in-Charge
and can be done accordingly.
19. 29.12 Proforma for intimating compensation Deleted
under clause 2
The Government of India have prescribed a
proforma for intimating the contractor with regard
to levy of compensation under clause 2 of the
contract as shown in Appendix 31.
20. 29.13 Rescheduling of milestones (Added
vide OM DG/MAN/278 dt. 11.6.2013)
The rescheduling of milestones should be Deleted
done by the field staff as soon as the request for
rescheduling of milestones, to be eligible for
consideration, is received from the contractor.
The first milestone should be rescheduled
based on the hindrances occurred during the
time allowed for that milestone. The other
milestones should also suitably be shifted
based on rescheduling of the milestone as
mentioned above. If hindrances occur again
during period of second milestone then second
milestone should also be rescheduled along
with shifting third and fourth milestone also.
Such process should be continued on the basis
of hindrances occurred during every milestone
till the work is complete. After rescheduling the
last milestone and completion of work, the
EOT shall be granted based on the hindrances

Page 21 of 54
 considered while rescheduling of all milestones
during of execution of work. The following
procedure for rescheduling of milestones can
be adopted:
(2) If contractor cannot complete the work
against any of the milestone(s) due to
having been unavoidably hindered in
execution thereof, or on any other ground,
he can apply for re-scheduling of the
milestone(s) within 14 days of the
happening of the event causing delay or
after completion of the milestone, on the
prescribed form as prescribed below:-
21. 29.13 Rescheduling of milestones (Added
vide OM DG/MAN/278 dt. 11.6.2013)
FORM OF APPLICATION BY THE CONTRACTOR FOR Deleted (Shifted to GCC 7/8)
SEEKING RESCHEDULING OF MILESTONES
22. 29.13 Rescheduling of milestones (Added
vide OM DG/MAN/278 dt. 11.6.2013)
(2) After submission of application for Deleted
rescheduling of milestones by the contractor,
the rescheduling shall be done by the competent
authority i.e. Superintending Engineer as
described in the schedule
F of GCC in the following time period:
(i) Sub division Office - 5 days
(ii) Division Office - 5 days
(iii) Circle Office - 5 days
23. 29.14 - Guidelines for fixing of milestones for Deleted (Shifted to 15.9 (13).
building projects.
24. Section 29 Annexure See sl. – below:-
Proforma for Hindrance Register
25. 33.1 Clause 2 of CPWD Forms no. 7 and 8 and 33.1 Guidelines in respect of Clause 2 (excluding
clause 16 of the CPWD Form no. 12 (Modified clause 2A) of CPWD Forms no. 7 and 8 and
vide OM DG/MAN/255 det. 7.12.2012) clause 16 of the CPWD Form no. 12 have
been given under Section 29.

(1) These clauses refer to recovery of Deleted

compensation from the contractor for
delays and defaults on his part. This clause
can be divided mainly into three parts, viz.:
a) Observation of time allowed for
completion of the work.
b) Payment of compensation by
contractor for non-commencement,
not finishing in time or slow progress

Page 22 of 54
 during execution.
c) The decision of the Chief Project
Manager/Project Manager/
Superintending Engineer regarding
compensation payable by the
contractor shall be final.
(2) As already explained under section 29 of
this Manual relating to extension of time Deleted
to contractors and imposition of
compensation for delayed performance,
time allowed for completion of the work is
essence of the contract on the part of the
contractor. The date for commencement
of the work starts from the stipulated date
that is mentioned in the letter of
acceptance to the contractor.
(3) For slow performance or delay in the
completion of the work, compensation, Deleted
subject to a maximum of 10% of the
tendered value, is recoverable.
(4) The compensation for slow progress or
non-completion of work in stipulated time,
at the rates specified therein, is an "agreed
compensation" under clause 2, which the
contractor has to pay in case of default.
Therefore, there is no choice for the
Engineer-in-charge but to recover the
same at the rates mentioned in clause 2 of
the contract, if the progress of the work is
slow or the work is not completed in
stipulated time. In case the contractor
feels aggrieved, he may appeal to the
Chief Project Manager/Project Manager/
Superintending Engineer against such
recovery, who may uphold the recovery at
the original rates or at reduced rates or
completely waive off the same depending
upon the merits of each case. In such cases
the decision of the Chief Project
Manager/Project
Manager/Superintending Engineer shall be
final and out of purview of the Arbitration
clause. Deleted
(5) In case the contractor does not achieve a
particular milestone as stipulated under
clause 5 of the agreement, or as re-

Page 23 of 54
 scheduled, the amount shown against that
milestone shall be withheld automatically
and without any notice to the contactor,
and may be adjusted against the
compensation that may be levied at the
final grant of extension of time. However,
if the contractor catches up with the
progress of the work on the subsequent
milestone(s), the withheld amount shall be
released to him. In case the contractor
fails to make up the delay in the
subsequent milestone(s), the amount
mentioned against each milestone missed
shall also be withheld. No interest shall be
payable on the withheld amount.
26. 33.1.1 Notice to the contractor (Modified vide
OM DG/MAN/255 det. 7.12.2012) Deleted
Under these clauses, irrespective of the value
of the contract, the SE/PM/CPM alone is the
competent to levy compensation. The decision
as to the quantum of compensation calculated
on basis of rate given in the clause, to be
levied has therefore necessarily to be given in
all cases by the SE/PM/CPM.
The Chief Project Manager/Project Manager/
Superintending Engineer should give a
registered notice to the contractor, of his
intention to levy the compensation. Proformas
for show cause notice to be issued to the
contractor regarding compensation under
clause 2 have been given in Appendix 31A &
31B (Modified vide OM DG/MAN/255 dt.
07.12.2012)
(i) When work either is in progress or has been
completed. (Appendix- 31A).
(ii) In case of contract is determined under
clause 3. (Appendix- 31B). (Added as per
OM/MAN/221)
Reply submitted by the contractor, if any
should be taken while deciding the
compensation.
27. 33.1.2 Recovery of compensation after
EOT is sanctioned
The recovery of compensation should Deleted
be effected after decision on extension of
time has been obtained.

Page 24 of 54
28. 33.3 Clause 3 of CPWD Forms no. 7 and 8 and
clause 17 of CPWD Form no. 12
(1) These clauses deal with determination of
contract, forfeiture of security deposit
and execution of work through other
agencies. These clauses are very
important and are of vital importance.
According to the clauses, when the
contractor has rendered himself liable to
action under relevant clause, the
Engineer-in-charge, for and on behalf of
the President, shall have powers to
determine the contract. Termination
notice given in writing to the contractor
under the hand of the Engineer-in-charge,
for and on behalf of the President, shall be
conclusive evidence for enforcement of
this clause.
33.3 Clause 3 of CPWD Forms no. 7 and 8 and
Similar Clauses of other Forms
(1) This clause deals with determination of
contract, forfeiture of security deposit and
execution of work through other agencies.
The determination as per clause 3 essentially
means determination of the obligation of both
the parties in the particular contract so far as
performance of the work is concerned. Hence
it is not termination of contract, as many of
the clauses of the contract survive such
determination for measurement of works,
settlement of accounts, site clearance,
settlement of compensation, dispute
resolution etc.
The determination of contract is possible as
per law or as per terms of contract. Clause 3
provides the contractual rights out of breach
of certain terms entitling the Engineer in
Charge to determine the contract. When a
contract provides for determination for
breach of certain terms, such terms need not
necessarily be conditions of contract, to
entitle the party so empowered to determine
the contract. However, the contractual
procedure should be scrupulously followed for
determination of contract and any breach of
procedure may make the determination
illegal.
Determination of contract under clause 3
need not be in every case only on anticipated
breach of performance on completion date
and such action can be taken based on other
terms in clause 3, including failure to proceed
with the work with due diligence. However, in
case the determination under clause 3 is for
anticipated or actual breach of contract for
non-completion in completion time, such time
has to be made essence of contract for
completion of work before action under
clause 3. This is a statutory requirement under
Section 55 of the Indian Contract Act, 1872.
How this is to be done has been dealt with in
Section 29.
If the contract is for performance of a work
and not a contract for performance for a time
Page 25 of 54
period and the time is made essence of
contract, the contract shall not come to end
automatically on expiry of time, but in such
case the innocent party obtains the right to
avoid the contract for non performance at
such time as per Section 55 of Contract Act.
Hence the contract does not automatically
come to an end if time is not extended
further, but the innocent party has obtained
only a right to avoid the contract and has to
put the contract to an end. Hence in such case
there has to be a positive action under Clause
3. If the contract has not been determined on
the expiry of justified extended date, time
needs to be extended as per clause 5.4 making
such time as essence for performance of work
by the contractor as laid out in Section 29,
before any action is taken to determine the
contract under Clause 3. Non-performance by
the contractor in such extended period shall
entitle the Engineer-in-Charge to determine
the contract under relevant provision in clause
3.
In case there is no fair and reasonable
extension of time granted on expiry of
justified extended date, time may be treated
as set at large.
The show cause notice under clause 3 must
mention the particular sub-clause of clause 3
on which reliance is placed for breach by the
contractor and should not be vague. In case
the determination of contract is under sub
clause 3(iii), the show cause notice should be
categorical i.e. either for anticipatory breach
for non-performance during extended time
notified as essence for performance of
contract or for actual non-performance on
such extended date.
Determination of contract under clause 3
discharges the primary obligation on the part
of the contractor to perform the contract, but
gives rise to obligations to pay damages, as
provided in clause 3, as consequences of
determination. Clause 3 determination notice
given in writing to the contractor under the
hand of the Engineer-in-charge, for and on

Page 26 of 54

(2) Clause 3 of the agreement inter-alia
provides that if contract is determined,
the earnest money deposit, security
deposit already recovered and
performance security/guarantee under the
contract shall be liable to be forfeited and
shall be absolutely at the disposal of the
Government.
(3) The contractor, whose contract is (3) The contractor, whose contract is determined
determined as above, shall not be allowed
to participate in the tendering process for
the balance work.
29. 33.3.1 Action under clauses 2 and 3 are 33.3.1 Action under clauses 2 and 3 are
independent
The provision of clause 3 can be applied
even after recovery of compensation under caused due to delay in performance, whereas, the
behalf of the President, shall be conclusive
evidence for enforcement of this clause. The
Tender Accepting Authority should approve
the draft show cause as well as the draft final
notice under clause 3 before its issuance by
Engineer-in-charge.
Determination of contract is a drastic action
and due precaution should be taken before
taking such action. The following points as
applicable should be ensured before issue of
show cause/ determination notice for
determination of contract:
a) Actions under clause 5, 12 and 15 as
applicable are taken as per the contract and
in time.
b) The terms on which the notice for
determination is issued in show cause and
final notice are properly satisfied and
expressly mentioned in the notice.
c) In order to be reasonable and capable of
holding Judicial/Arbitral scrutiny, actions to
issue show cause and final notice should be
within reasonable period, respectively, of
cause of action and of reply to show cause.
Otherwise, claim of acquiescence may arise.
d) The determination notice should include
conclusive finding against the reply
submitted by the contractor, if any, to the
Show Cause notice issued.
(2) Clause 3 of the agreement inter-alia provides
that if contract is determined, the earnest
money deposit, security deposit already
recovered and performance security/
guarantee under the contract shall be liable to
be forfeited and shall be absolutely at the
disposal of the Government.
as above, shall not be allowed to participate in
the tendering process for the balance work.
independent
The compensation under clause 2 is for loss
Page 27 of 54
 clause 2, as the two clauses are independently compensation under clause 3 is for consequential
enforceable to the full extent. losses due to non-performance of contract. Hence
the Govt. is entitled to compensation under clause 3
and clause 2 independently. Hence, it is advisable
to take action under clause 2 for levy of
compensation depending on liability of contractor
under clause 2 based on the delay at the stage of
clause 3 action, before determination.
30. 33.3.2 Notice to the contractor Deleted
Proper Show cause notice and Final notice
should be served for action under clause 3 as
per the contract and as explained above.
(1) Two model forms of letters have been
introduced to be issued by the Engineer-
in-charge for and on behalf of the
President of India for serving the "Show
cause Notice" as well as the Notice on
final action to the contractor under clause
3 of the agreement in respect of works
undertaken in the Department have been
introduced. Copies of these model forms
are as per are given in Appendices 32 and
33.
(2) While making use of these forms, the
following points should be kept in view:
(a) Alternatives wherever not applicable
should be deleted and suitable additions
made wherever considered necessary.
(b) While determining the contract under
any of the sub-clause (i) to (xi) of clause
3 for causes other than the causes as
mentioned in the standard form for "Show
Cause Notice" (viz. wrongful delay or
suspension of work or slow progress)
suitable modifications may be made,
where necessary, according to the
requirements of the case.
(3) Final notice under clause 3 of the
agreement form may thereafter be
drafted and approval of the
tender accepting authority as defined
under schedule 'F' of contract be
obtained.
31. 33.4 Clause 3A of CPWD Form No 7 and 8
(Closure of the contract)
In case, the work cannot be started due to Deleted

Page 28 of 54
 reasons not within the control of the contractor
within 1/8th of the stipulated time for
completion of work or one month whichever is
higher, either party may close the contract. In
case contractor wants to close the contract, he
shall give notice to the department stating the
failure on the part of department. In such
eventuality, the Performance Guarantee of the
contractor shall be refunded within following
time limits :
i. If the Tendered value of 15 days
work is up to Rs. 45 lac
ii. If the Tendered value of 21 days
work is more than Rs. 45
lacs and up to Rs. 2.5 Crore
iii. If the Tendered value of 30 days
work exceeds Rs. 2.5 Crore
If PG is not released within prescribed
limits then a simple interest @ 0.25% per
month shall be payable on PG amount to the
contractor from the date of expiry of
prescribed time limit.
A compensation for such eventuality, on
account of damages etc. shall be payable @
0.25% of tendered amount subject to
maximum limit of Rs. 10 lacs. (Modified vide
OM DG/MAN/285 dated 21.8.2013 and
DG/M'AN/291 dated 01.10.2013)
32. 33.5 Clause 5 of Forms no. CPWD 7 and 8 clause Deleted
4 of Form no. CPWD 9
Under clause 2, time is deemed to be the
essence of the contract on the part of the
contractor. The time allowed for execution of
the work as specified in Schedule 'F' of the
contract, or the extended time in accordance
with the conditions in the contract, shall be the
essence of the contract. It is, therefore,
necessary for a contractor to complete the job
within the stipulated period.
33. 33.5.1 Action on failure to commence the 33.4 Action on failure to commence the work
work
If contractor fails to start the execution If contractor fails to start the execution of the
of the work, the earnest money and work, the performance guarantee shall be forfeited
performance guarantee shall be forfeited by by engineer-in-charge with the prior approval of
engineer-in-charge with the prior approval of tender accepting authority as defined in Schedule -
tender accepting authority as defined in F.

Page 29 of 54
 Schedule - F.
34. 33.5.2 Progress of work as per milestones
As soon as possible after the contract is concluded, Deleted
the contractor shall submit a time and progress
chart for each milestone and get it approved from
the Department. The chart shall be prepared in
direct relation to the time stated in the contract
documents for completion of the items of the work.
It shall indicate the forecast of the dates of
commencement and completion of various trades
of sections of the work and may be amended as
necessary by agreement between the Engineer-in-
charge and the contractor within the limitations of
time imposed in the contract documents, and
further to ensure good progress during the
execution of the work. The contractor shall in all
cases in which time allowed for any work exceeds
one month (save for special jobs for which a
separate program has been agreed upon) complete
the work as per milestones given in Schedule 'F'.
The maximum amount that is to be withheld in case
of non-achievement of milestones shall not exceed
5% of tendered value of the work. (Added vide
OM/MAN/169)
35. 33.5.3 Re-scheduling of milestones Deleted
(1) If however, he cannot complete the work
against any of the milestone(s) due to having
been unavoidably hindered in execution
thereof, or on any other ground, he can apply
for re-scheduling of the milestone(s) and
extension of time within 14 days of the
happening of the event causing delay, on the
prescribed form. The contractor may also, if
practicable, indicate in such a request the
period for which extension of time is desired.
The detailed procedure of granting extension
of time under this clause has been dealt under
section 29 of this Manual - "Extension of Time".
(2) Extension of time is also justified to the
contractor for additional work that is required
to be worked out as provided in clause 12 of
the agreement [para 33.11.1 may be referred
to].
(3) The Engineer-in-charge shall give a fair and
reasonable extension of time and re-schedule
the milestone(s) for completion of the work.

Page 30 of 54
 Rescheduling the milestones will include
changing the number of milestones also.
(4) Even after rescheduling of milestones total
percentage of tendered amount which can be
withheld in case of non achievement of
milestones shall remain unchanged as decided
under clause 5 of Schedule -F. (Added vide
OM/MAN/169)
36. 33.5.4 Finality of decision on EOT
According to this clause, the opinion of Deleted
the Engineer-in-charge as to whether the
grounds shown for extension of time are or are
not reasonable, are final. If the Engineer-in-
charge declines to grant extension of time, it is
not within the competence of the contractor to
challenge the soundness of the opinion by
reference to arbitration under the relevant
clause. The Engineer-in-charge should give
extension as may be, in his opinion, necessary or
proper. His opinion as to whether the period of
extension granted by him is proper, is not,
however, final. The contractor can seek
arbitration on the question whether the period
of extension granted is or is not proper.
37. 33.5.5 Grant of EOT when the contractor
does not apply
The period during which the contract Deleted
remains valid is a matter of agreement and if the
period originally set for the completion of the
work comes to an end, nothing short of
agreement of the party can extend the
subsistence and validity of the contract. When
the period fixed for the completion of the
contract is about to expire, the question of
extension of the contract may be considered at
the instance of the contractor or the
Department or of both. The extension, in order
to be binding, will have to be by parties to
agreement express or implied. It, therefore,
follows that if the extension of time is granted
by the Executive Engineer suo-moto, and such
extension of time is accepted by the contractor
either expressly or implied by his action before
and subsequent to the date of completion, the
extension of time granted by the Executive
Engineer is valid. It is, therefore, necessary that

Page 31 of 54
 the Executive Engineer grants extension of time
even when the contractor does not apply for
extension of time in order to keep the contract
alive. If the contractor refuses to act upon the
extension granted by the Executive Engineer, it
will attract the provisions of clauses 2 & 3 of the
agreement.
38. 33.5.6 Compensation for delayed Deleted
performance
The compensation for delayed performance,
on account of which extension of time is
granted by the Executive Engineer, which could
be leviable under clause 2 would be a distinct
matter. The decision to levy compensation
under clause 2 would depend on:
(i) Prior notice as contemplated by Section 55
of the Indian Contract Act, 1872.
(ii) Fault/delay/hindrance being attributable
to the contractor, and
(iii) Proof of the loss occasioned thereby (in
case it is challenged by the contractor
before the Arbitrator).
39. 33.5.7 Hindrances to be carefully weighed Deleted
before deciding on EOT
(1) The contractor in his application for extension
of time, points out the various delays and the
lapses on the part of the Department that he
considers unavoidable hindrances. The
Engineer-in-charge, while recommending or
granting cases for extension of time, generally
accepts these reasons for delay to be correct.
The contractor may claim damages or
compensation in arbitration, for prolongation
of work due to defaults or lapses on the part of
the Department. When such cases come before
the Arbitrator, the action of the Engineer-in-
charge in accepting the reasons for extension of
time may assist the evidence for the claims of
the contractor for damages etc.
(2) Though there may be delays and lapses on the
part of the Department, yet at the same time
there are also delayed lapses on the part of the
contractor. For such delays during the

Page 32 of 54
 stipulated or extended period of completion,
the contractor is responsible, but these are also
to be taken into account by the Divisional
Officer while recommending or granting
extension. To safeguard Government's interest
these lapses on the part of the contractor
should invariably be clearly mentioned by the
Engineer-in-charge while granting/
recommending extension of time.
(3) In granting extension of time, a balanced
view should be taken of the delays on the
part of the contractor, vis-a-vis the delays
of the Department. The mention of the
delays on the part of the contractor along
with those of the Department would
ultimately help the Department in properly
defending its position before the Arbitrator
against the claims of the contractor for
damages.
[There is no corresponding clause in Forms no.
CPWD 10, 11 and 11 A. Clause 18 of Form no.
CPWD 12 is similar to clause 5 of Forms no.
CPWD 7 and 8 with minor change.

40. 33.6 33.5

33.7
33.8
33.9
33.10
41. 33.11(2)
33.11 A. Clause 13 of form No. CPWD 7 & 8
If at any time after acceptance of the
tender, Engineer-in-charge shall decide to
abandon or reduce the scope of the works for
any reasons whatsoever and hence not
required the whole or any part of the work to
be carried out, the Engineer-in-charge shall give
notice in writing to that effect to the contractor
and the contractor shall act accordingly in the
matter
33.6
33.7
33.8
33.9
33.11(2)
33.11.1
33.11.2
33.11.3
33.11 A. Clause 13 of form No. CPWD 7 & 8
This clause recognises the Executive
Necessity and avoidance of unnecessary public
expenditure. Hence when the purpose of the work
in full or part has become unnecessary after
entering into a contract and hence a project need
to be abandoned in part or in full, it is allowed to
do so without claim of damages by the contractor.
This is in public interest. Hence this clause is not
for foreclosure for breach of contract by the

Page 33 of 54

The Engineer-in-charge shall take prior
approval from the NIT approving authority
before deciding to abandon or reduce the
scope of the work in this regard. (Added vide
OM DG/M AN/270 dt. 01.05.2013).
33.11.1
33.11.2
33.11.3
33.12
42. 35.1 Dispute Redressal Committee
(2) In the first instance, the Executive
Engineer, Superintending Engineer, or
the Chief Engineer shall positively give his
decision on any matter relating to the
contract, for which he is competent to do
so. If the decision so given is not
acceptable to the contractor for any
legitmate reason, efforts shall be made to
reason with the contractor to arrive at a
consensus that is reasonable and
legitimate under the terms and
conditions of the contract. If, however,
no consensus can be reached, the matter
shall be referred to the next higher
authority, and if no consensus can be
reached at that level too, then the Chief
Engineer shall refer the matter to the
Committee for adjudication. In other
words, cases shall be referred to the
Committee only after exhausting all other
remedies available with the officers of
the department who are a party to the
Department and action under this clause has to be
bona fide. The clause though provides for some
nominal compensation payable to the contractor
on such eventuality but no damages.
The Engineer-in-charge shall take prior
approval from the NIT approving authority before
deciding to abandon or reduce the scope of the work
in this regard. The NIT approving authority shall
ensure the action proposed is bonafide and in
good faith and in Executive necessity and not
otherwise, before deciding to abandon or reduce
the scope of the work.
33.12
35.1 Dispute Redressal
(2) Efforts shall be made to avoid defects and
deficiencies in the contract documents and
decisions should be given in time. A
discrepancy if purely a mistake in a
document can even be rectified with the
consent of the contractor by the Accepting
Authority. Legitimate efforts shall be made
to avoid disputes and solve the differences
as per terms of contract. In case the
contractor makes a claim in the first instance,
the Executive Engineer should give a decision
or if beyond his competence should consult
the Superintending Engineer, Project
Manager, Chief Project Manager or the Chief
Engineer (Additional DG where there is no
Chief Engineer) who shall positively and
timely give decision on any matter arising out
of the contract. They shall decide on merit
and if any remedy can be given legitimately
shall positively give so. It must be noted that
if proper decision is given in time and yet
the same is not accepted by the contractor
and the contractor goes for arbitration,
there shall be a legal defence against claim
of interest and costs against the contractor;
but failure to give such decision may burden
the Government with avoidable additional
liability. If the decision so given is not
acceptable to the contractor and he applies
for reference to DRC, the authority in clause
25 shall refer the matter to the Dispute
Page 34 of 54
 contract. Redressal Committee for adjudication.
Similarly the E-in-C can request for reference
of disputes to Dispute Redressal Committee
as per the procedure in clause 25.
43. 35.1 Dispute Redressal Committee 35.1 Dispute Redressal
(3) The Superintending Engineer and his (3) The Authority competent under Clause 25
Executive Engineer, who are parties to the shall refer the dispute to DRC within 15 days
contract under dispute, shall present the of receipt of such request from contractor or
case of the department before the Engineer-in-Charge, with a list of dispute and
Committee, alongside the contractor who amounts claimed, if any.
shall present his case. The Committee shall
hear both the parties, and suggest an
amicable and legitimate solution to the
problem, based on the principle of equity
and natural justice. If the same is
acceptable to both the parties, it shall be
accepted by the officer in the department [Shifted to 35.1 (4)]
under whose competence the matter falls,
and conveyed for implementation. If,
however, the Committee fails to resolve the
issue, the decision taken by the competent
authority of the department in the matter
would stand. It would then be up to the
contractor to either accept it, or to apply for
arbitration under the provisions of the
contract.
44. 35.1 Dispute Redressal Committee 35.1 Dispute Redressal
(4) Wherever such a Dispute Redress (4) Wherever such a Dispute Redress Committee
Committee is constituted in a Region, is constituted in a Region, suitable provisions
suitable provisions for the same should for the same should be made part of NIT that
be made part of NIT that ADG in charge ADG in charge shall be the competent
shall be the competent authority to authority to constitute DRC comprising
constitute DRC comprising members members mentioned above. This shall be
mentioned above. This shall be incorporated the Schedule of CPWD 7/ 8, and
incorporated the Schedule of CPWD 7/ 8, shall form a part of the contract.
and these shall form a part of the
contract.
The DRC shall have to give decision on The DRC shall give decision on the claims of
the claims of contractor or department contractor or department within period as per
within three months of receipt of contract. If no decision is given by DRC within
reference. If no decision is given by DRC this period or a party is not satisfied with
within three months then claimant shall the decision of DRC, then either party shall
be at liberty to seek appointment of be at liberty to seek arbitration.
arbitrator.
If the decision of DRC in full or part is
acceptable to both the parties, it shall be

Page 35 of 54

In case, either department or contractor
is not satisfied with the decision of DRC,
each can seek appointment of
arbitrator.
The contractor shall only be entitled to
invoke the arbitration clause after
exhausting the remedy available under
the Dispute Redressal Committee
45. 35.2 Application of arbitration clause 25 of
standard contract form
(1) Clause 25 of the standard Forms No.
CPWD 7 and 8 and other relevant
clauses in Forms no. CPWD 9, 11, 11 A
and 12, provides for appointment of an
Arbitrator in case of questions and
disputes relating to certain matters,
specified therein arising at any stage,
whatever, between the parties. This,
however, does not apply to action taken
under following clause where the
decision of the specified officer is final to
the extent given below:
Clause 5: Opinion of the Engineer-in-
charge as to the reasonability of the
grounds shown by the contractor for
granting extension of time.
(2) The Contractor cannot have recourse to a
court of law for the redressal of his
grievances, unless he has exhausted the
channel of the 'Disputes Redressal
Committee', or arbitration as envisaged
in relevant arbitration clause. Even if the
contractor goes to court, the Executive
Engineer should take a plea that the
contractor being a signatory to the
agreement containing arbitration
clause, any dispute arising out of or in
any way connected with the execution
or work has first to the 'Dispute redress
Committee', failing which, to arbitration
accepted by the officer in the department
under whose competence the matter falls as
per financial power and conveyed to
Engineer-in-Charge for implementation.
The contractor or Engineer-in-Charge shall
only be entitled to invoke the arbitration
clause after exhausting the remedy available
in the Dispute Redressal Committee.
35.2 Application of arbitration clause 25 of
standard contract form
(1) The contractor shall be entitled to invoke
the arbitration clause only after exhausting
the remedy available under the Clause 25 of
the standard Forms No. CPWD 7 and 8 and
other similar clauses in other Forms which
provides for appointment of an Arbitrator in
case of disputes relating to certain matters,
specified therein arising at any stage,
whatever, between the parties.
(2) The Contractor is not entitled to take recourse
to a court of law for resolution of disputes
that are arbitrable since there is an
agreement for arbitration of disputes, in
view of exceptions under Section 28 of the
Indian Contract Act, 1872. Even if the
contractor goes to court, the Executive
Engineer should take a plea before court that
the contractor being a signatory to the
agreement containing arbitration clause, any
dispute arising out of or in any way connected
with the execution or work has to be resolved
by reference to arbitration as per Section 8
of the Arbitration and Conciliation Act, 1996.
Page 36 of 54
 first to be settled by reference to the
'Dispute redress Committee', failing
which, to arbitration.
46. 35.3 Application for appointment of
Arbitrator
(1) A standard application form seeking
appointment of arbitrator has been
evolved. Contractors seeking arbitration
should apply in this Form as shown in
Annexure-I
(2) The application form, duly filled in, shall
be submitted by the contractor to the
Chief Engineer with two copies thereof
to the concerned Executive Engineer. All
the three copies of the application form
shall be accompanied by a statement of
claims in the matter indicated in the
application form.
(3) The arbitration clause can be invoked by
the Engineer-in-charge as well by
applying to the Chief Engineer for
appointment of the Arbitrator. He should
apply for arbitration as and when the
dispute arises and should not wait till
the end. He should also stick to the time
schedule mentioned in the clause 25(i) for
contractor.
(4) The party invoking arbitration clause
should give information enough to justify
existence of dispute. For this purpose, the
party has to give details about the
demand having been made and its refusal
by the other party. It is held by Courts of
Law that a "dispute" implies an assertion
of right by one party and repudiation
thereof by the other. Existence of a
dispute is a condition precedent to
arbitration. If there is no existence of
dispute there cannot be any right to
demand arbitration.
(5) In view of the above, before appointing
arbitrator, the Chief Engineer, should
ensure that existence of dispute(s) has
been established. For this purpose the
party invoking arbitration clause should
be asked to produce documentary
35.3 Application for appointment of Arbitrator
(1) A standard application form seeking
appointment of arbitrator has been evolved.
Contractors seeking arbitration should apply
in this Form as per GCC 7/8 Annexure-XV
(2) The application form, duly filled in, listing out
disputes and claim amount against each
dispute shall be submitted by the contractor
to the competent authority as given in
contract (Clause 25 of GCC-7/8 etc.) with two
copies thereof to the concerned Executive
Engineer.
(3) The arbitration clause can be invoked by the
Engineer-in-charge as well by applying to the
Authority in clause 25 for appointment of the
Arbitrator. He can apply for arbitration as and
when the dispute arises and need not
necessarily wait till the completion of work.
(4) Existence of a dispute is a sine qua non (a
thing that is absolutely necessary) to
arbitration. If there is no dispute there cannot
be any right to demand arbitration.
(5) In view of the above, before appointing
arbitrator, the Authority in clause 25, should
examine existence of dispute(s). For this
purpose the party invoking arbitration clause
should be asked to produce documentary
evidence of its claims having been duly
Page 37 of 54
 evidence of its claims having been duly
lodged with the other party and refusal
by the other party to accede to them or
no response by other party within
stipulated time.
47. 35.4 Preparation for arbitration cases
(1) The following steps should be taken by
the Divisional Officers with a view to
properly defend the Arbitration cases:
(i) As soon as a contractor applies for
arbitration, the Executive Engineer
should prepare a detailed history
sheet containing the data regarding
estimates, designs and drawings,
NIT, agreements, extra and
substituted items, reduction
statements, extension of
time/notices issued under clause
2,14 etc., and send a copy to his
Superintending Engineer.
(iv) The Measurement Books should
be closed.
(3) The Executive Engineer shall inform the
authority with whom Extra/Substituted
/Deviations/RR items are pending about
the arbitration case with a request to
approve the items immediately. The
concerned authority shall ensure that all
such pending items are finalized before
CSF is submitted.
48. 35.5 Processing of contractor's application
(1) The Executive Engineer shall send one
copy of the application of contractor
direct to the Chief Engineer, with the
under-noted information, without waiting
for a reference from the Chief Engineer,
within 15 7 days from the date of receipt
of the contractor's application in his
office, with a copy to Superintending
Engineer. The Superintending Engineer
should send his report to Chief Engineer
immediately.
lodged with the other party and refusal by the
other party to accede to them or no response
by other party and reference to DRC.
35.4 Preparation for arbitration cases
(1) The following steps should be taken by the
Divisional Officers with a view to properly
defend the Arbitration cases:
(i) As soon as a contractor or the Engineer-
in-Charge applies for arbitration, the
Executive Engineer or Divisional officer
should prepare a detailed history
containing the data regarding estimates,
designs and drawings, NIT, agreements,
extra and substituted items, reduction
statements, extension of time/notices
issued under clause 2, 3, 14 etc., and
send a copy to his Superintending
Engineer/ PM/CPM.
(iv) Copies of the Measurement Books
should if required be provided to sub-
divisions for completion of
measurement.
(3) The Executive Engineer shall inform the
authority with whom Extra/Substituted/
Deviations/RR items are pending about the
arbitration case with a request to approve the
items immediately. The concerned authority
shall ensure that all such pending items are
finalized within the time prescribed in the
contract and in any case before statement of
defence is submitted.
35.5 Processing of contractor's application
(1) Within 7 days of receipt invocation of
arbitration and request for appointment of
arbitrator by the contractor before the
authority competent as given in contract
(Clause 25 of GCC-7/8 etc.) and without
awaiting reference from higher office, or,
alongwith his own request (under intimation
to the other party) for appointment of
arbitrator, the Executive Engineer shall send
the following information to the said
authority.
Page 38 of 54
49. 35.6 Appointment of Arbitrator
(1) Disputes are referred to either a tribunal of
(2) Where the contract provision is for a sole
(1) The standard form of appointment letter
at Appendix 34 is to be used for
appointing an Arbitrator.
(2) In those cases where the amount of the
claim is less than Rs.1,00,000 (Rupees One
lakh), para 2 of the standard form should
be deleted. (Para 2 states that the
Arbitrator shall give reasons for the award
if the amount of claims in dispute is Rs.
35.6 Appointment of Arbitrator
sole arbitrator or three Arbitrators as per
provision of Arbitration Agreement (e.g. Clause
25 of GCC 7/8).
arbitrator, the Appointing Authority shall
follow the terms of clause 25 and shall appoint
an arbitrator and refer the disputes to him if
either party requests for arbitration. Where
the contract provision is for three arbitrators,
the appointing authority shall follow the terms
of clause 25 and shall appoint one arbitrator if
either party requests for arbitration. The
standard form of appointment letter at
Appendix 34 /34A respectively is to be used for
appointing an Arbitrator. The sole or one
arbitrator, in case he is an employee of CPWD,
shall be as appointed by the Appointing
Authority subject to fulfillment of requirement
of Section 12(5) of the Arbitration and
Conciliation Act, 1996 as amended in 2015
with reference to Seven Schedule i.e.
agreement by the parties in writing after the
disputes have arisen w.r.t. appointment of
such an arbitrator. Otherwise the Appointing
Authority shall appoint a suitable arbitrator
with due consideration of the requirements of
Fifth Schedule of the Arbitration and
Conciliation Act, 1996 as amended in 2015.
The Appointing Authority must in every case
ensure that the arbitrator so appointed
satisfies the qualification as per the arbitration
clause. It shall be the duty of the Appointing
Authority to appoint an Arbitrator of good
reputation and professional knowledge in
arbitration. Hence in each case the power of
appointment of arbitrator must be exercised
with due diligence by the Appointing
Authority.
Deleted
Page 39 of 54
 one lakh or above).
(3) The Government of India have appointed
a panel of Arbitrators in the Ministry, and
generally the CPWD WORKS MANUAL
2014 SECTION 35 160 Years of Engineering
Excellence 241 cases of disputes between
the Government and other parties are
referred to the sole arbitration of one of
them as may be decided by the Chief
Engineer/Director General (Works).
(3) Where the contract provision is for three
(4) The Appointing Authority shall refer the
(5) The Appointing Authority while referring
Deleted
arbitrators and
a) the contractor fails to appoint the
second arbitrator, or
b) The two appointed Arbitrators fail to
appoint the Presiding Arbitrator,
within the prescribed time, the Appointing
Authority shall ensure that Engineer-in-Charge,
without delay requests the Director General,
CPWD to appoint the second or Presiding
Arbitrator as the case may be.
disputes to the Arbitral Tribunal as soon as the
Presiding Arbitrator is appointed. Wherever it
is found that
a) the arbitrator appointed by the
contractor, or
b) The Presiding Arbitrator appointed by
the two appointed Arbitrators
is not eligible under seven schedule of
Arbitration and Conciliation Act 1996 (as
amended in 2015), the remedy shall be under
Section 14 of the Act. However, in case there
are justifiable doubts under fifth schedule
there shall be challenge to jurisdiction of
arbitrator by Engineer-in-Charge under Section
16 of the Act, without any delay.
However, challenge to the appointment of
Arbitrator under Section 16 of A&C Act shall
not be a ground for not referring the disputes
to the Presiding Arbitrator.
disputes to arbitrator is not to decide whether
the dispute is arbitrable or not; or whether it
is barred by limitation or not. These are
matters to be decided by arbitrator and
Page 40 of 54

(4) The person thus appointed shall be the
sole Arbitrator, and his award shall be final
and binding on all parties to the contract,
unless it is set aside by the Court.
(5) Whenever a notice for appointment of an (6) Whenever a notice for appointment of an
Arbitrator is received from a contractor in
terms of clause 25 of Agreement Forms
No. CPWD 7 and 8 (and corresponding
clauses in other forms), the Chief Engineer
should process the case so as to appoint
an Arbitrator within 30 days from the
receipt of such a notice. The time limit of
30 days for appointment of Arbitrator
should be strictly adhered to.
(6) In cases where no agreement exists, or
where no clause exists in an agreement for
referring the matter of dispute to the sole
arbitrator of a person to be appointed by
the Chief Engineer/Director General, the
disputes should not be referred to
arbitration by mutual consent and no
agreement should be drawn up for this
purpose.
(7) The authority of an appointed Arbitrator (7) The mandate of an appointed Arbitrator is not
does not become revocable except with
the order of the Court. It shall not be
revocable by the death of any party or
parties to the contract.
(8) In case arbitration proceedings are terminated
parties are at liberty to raise objections on
these issues before the Arbitrator. The role of
Appointing Authority is only to appoint the
arbitrator and refer a list of disputes. Hence
the Appointing Authority should not hold any
request because in his opinion it is an
excepted matter and hence not referable to
arbitrator. Whether it is an excepted matter or
not may itself be matter of dispute and is to
be decided by the arbitrator. Objection, if any,
is to be raised before the arbitrator by the
parties. The award by the tribunal thus
appointed shall be final and binding on all parties
to the contract, unless it is set aside by, or a
stay obtained by a separate application on the
award from, the Court.
Arbitrator is received from a contractor in terms
of clause 25 of Agreement Forms No. CPWD 7
and 8 (and corresponding clauses in other
forms), the Appointing Authority should
process the case so as to appoint an Arbitrator
within 30 days from the receipt of such a notice.
The time limit of 30 days for appointment of
Arbitrator should be strictly adhered to. Non
receipt of comments from Executive
Engineer/Superintending Engineer in respect
of disputes shall not be a basis of not adhering
to the limit of 30 days.
Deleted
revocable except with the order of the Court or
his resignation or by consent of both the
parties. It is not revocable by the death of any
party or parties to the contract.
by arbitral tribunal under Section 25(a) of
Arbitration Act, because of not submitting
Page 41 of 54

(8) The draft letter for appointment of a new
Arbitrator due to transfer or vacation of
office by the old Arbitrator shall be as per
Appendix 35.
50. 35.7 Action subsequent to appointment of
Arbitrator
(1) When the Arbitrator enters into
reference and writes to the parties to the
contract to file the statement of facts and
counter statement of facts before him,
the Executive Engineer should take
prompt action to prepare the defence,
duly supported by adequate
documentary evidence and witnesses,
and arrange for its submission to the
Superintending Engineer and the
Departmental Counsel, as may be
necessary, and get their approval, and
send to the Arbitrator by the date and
within the time specified by him. In cases
where the claims (excluding interest)
exceed Rs. 30 lakhs, (Modified as per
OM/MAN/200) advice of the Techno-
Legal Cell should be sought as given in
para 35.10.1.
statement of claim within time as per direction
of arbitral tribunal, there is no provision in law
for further appointment of arbitrator.
(9) The draft letter for appointment of a new
Arbitrator due to transfer or vacation of office
by the old Arbitrator shall be as per Appendix
35.
35.7 Action subsequent to appointment of
Arbitrator
(1) The arbitrator is competent to decide the
procedure unless otherwise agreed by the
parties. The amended arbitration law
stipulates stringent time lines and penalty
for seeking unnecessary adjournments or
delay in the proceedings. Hence when the
Arbitrator enters into reference and writes to
the parties to the contract to file the statement
of claims and statement of defence before
him, the Executive Engineer should take
prompt action to prepare the claim/defence,
as may be the case, duly supported by
adequate documentary evidence, and arrange
for its submission to the Superintending
Engineer/CPM and the Departmental
Counsel, as may be necessary, and get their
approval, and send to the Arbitrator by the
date and within the time specified by him.
Timely action must be taken as soon as the
Arbitrator is appointed to get the
Departmental counsel engaged, as no
extension shall normally be available on
such grounds.
(2) Arbitration involves both matters of facts
and technical issues as well as legal issues.
The legal issues shall generally involve the
Indian Contract Act, 1872, the Limitation Act,
1963 and the Arbitration and Conciliation
Act, 1996 and other relevant statutes. In
addition judicial precedents should be used
appropriately. The Executive Engineers shall
be fully trained in arbitration matters to
effectively handle arbitration.
(3) Proper use should be made of exhibits in the
pleadings during the hearing. The exhibits of
the opposite party, if doubtful, must be
verified in admission or denial of
Page 42 of 54

(2) The Executive Engineer should deal with
submission of counter statement with
utmost urgency and priority. Taking into
account the various difficulties in filing the
counter statement, it has been decided
that the Executive Engineer should submit
the counter statement of facts normally
within two month, and in exceptional
cases within three months from the date
of receipt of the statement of the facts.
(3) The Executive Engineers should
invariably follow this time limit.
However, in cases where they foresee
some unavoidable delay in adhering to
the time limit, they should explain the
position to the Arbitrator under
documents.
(4) Fast track arbitration can be adopted for
quick disposal if both the parties agree at
the time of appointment of Arbitrator.
However, the Department should consider
whether it requires the same and whether it
can meet the timeline as per the amended
arbitration law, before accepting such
arbitration.
(5) Often even before appointment of arbitrator
the Arbitration Act may be invoked under
s.9 for interim measures of protection
before Court. This may involve the Specific
Relief Act, 1963, the bank guarantee
agreements, the contract terms etc. and
judicial precedents. The court may direct
reference to arbitration within 90 days of
order under s.9 and in such cases the
arbitrator has to be appointed in such time.
In case writ jurisdiction is invoked by the
contractor, particularly against
determination of contract, the case should
be defended properly with the help of legal
counsel. The fact that the contract is
determinable and there can be remedy in
damages and that there is provision of
arbitration in the contract need to be
brought out in addition to inconvenience
that would be caused in granting the prayer
of the contractor.
(6) The Executive Engineer should deal with
submission of counter statement with utmost
urgency and priority and in every case within
the time prescribed by the Arbitrator.
The Executive Engineers should invariably
follow this time limit. However, in cases
where they foresee some unavoidable delay
in adhering to the time limit, they should
explain the position to the Arbitrator under
intimation to the other party and try to
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 intimation to the other party and obtain obtain extension of time before the expiry of
extension of time before the expiry of the stipulated date but in every case comply
the stipulated date. with the direction of arbitrator. The
procedural and administrative delays in
various units shall not be a valid ground to
seek extension of time.
(7) As per amendment to Arbitration Law
counter claims can be directly filed before
an arbitrator and no reference is necessary
by the appointing authority. In case of delay
in filing the statement of defence the right
to file the same may be forfeited. There
shall be costs for seeking unnecessary
adjournments.
(8) There shall be costs if the claims or
counterclaims are not successful. Hence in
case the contractor has made inflated claims
the same be pleaded in defence for seeking
adequate costs.
51. 35.10 Techno-Legal Units
(1) Arbitration cases pertaining to Sub- Deleted
Regions of Additional Director General
(NDR) and Additional Director General (DR)
are handled by Director (Works), and those
pertaining to other Sub-Regions, by the
Director (TLCQA)/Director Works of the
concerned Sub-Region.
(2) The Techno-Legal Units are required to
take up the cases as soon as CSF/SF is
prepared by the Department and is vetted
by the concerned Superintending Engineer.
These Units scrutinize the CSF/SF and
render necessary advice to the Executive
Engineer/Superintending Engineer
regarding defence of the case. The
Executive Engineer/Superintending
Engineer should, however, continue to
follow the procedure of getting the CSF/SF
vetted further by the Counsel.
(3) The Techno-Legal Units scrutinize the cases
of acceptance or otherwise of arbitration
award in the power of Additional Director
General/Special Director General/Director
General and render necessary advice. The
Chief Engineers may also seek their advice
in such cases.

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 (4) The Core Unit also deals with the cases of
appointment of Arbitrator other than the
designated Arbitrators of the Ministry of
Urban Development, correspondence
regarding legal opinion/opinion of the
Senior Counsel and suggestions for
modifications to the existing Rules and
Procedures, and any clarifications needed.
(5) The Techno-Legal Units are required to
examine the awards with a view to check:
(a) Whether the case has been properly
defended before the Arbitrator, and
(b) Whether there are any lapses on the
part of concerned officials due to
which the award has gone against
the department.
(6) The Techno-Legal Units shall bring such
cases to the notice of the Chief Engineer
for appropriate action.

52. 35.11 Production of official documents before 35.10 Production of official documents before
Court/Arbitrator and claiming 'Privilege' Court/Arbitrator
concerning the same
(1) In the course of legal/arbitration In case ‘discovery’ is sought by the
proceedings, the Court/Arbitrator may contractor during arbitral proceedings,
either themselves or at the instance of the proper defence may be raised, including
opposite party, require production of proof of ‘relevance’ and need of specifying
official records, e.g. files, correspondence, the documents. Similarly the Department
registers or the other documents which are should seek discovery, only if necessary and
supposed to have a bearing upon the case. should be specific depending on the disputes
While the Court/Arbitrator may require under adjudication.
production before them of any document
relevant to the case, it must be borne in
mind that in terms of Sections 123,124 of
the Indian Evidence Act, the Government is
permitted ' to claim privilege for not
producing documents, the disclosure of
which may be considered detrimental to
public interest. Such privilege may invariably
be claimed in respect of all "unpublished
records" of the Government i.e. documents
which have not come to the knowledge of
the other party. For this purpose "Notes
Portion" of a file and all communications
and letters other than those emanating
from or sent to the party (original or copies)

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 should be treated as "Unpublished" records
of the Govt. in respect of which privilege, as
aforesaid, can be claimed. This will be done
by producing before the Court/Arbitrator a
declaration, signed by the Director General
(Works)/Chief Engineer as Head of the
Department, stating that documents
referred in the declaration contain
unpublished official information relating to
the affairs of the State, and that privilege in
respect of the same is being claimed as their
disclosure would be detrimental to the
public interest.
(2) A departmental officer may appear as a
witness if summoned by the Arbitrator at (1) A departmental officer may appear as a
the request of a contractor also. He is witness if summoned by the Arbitrator at the
expected to give true and correct facts of request of a contractor also. He is expected to
the case. Deterrent action should be taken give true and correct facts of the case.
against the officials concerned, if they are Deterrent action should be taken against the
found responsible for giving wrong officials concerned, if they are found
evidence or concealing materials facts in responsible for giving wrong evidence or
an arbitration case. concealing materials facts in an arbitration
(3) Wherever required and found necessary, case.
records of Central Technical Examiner/ (2) Wherever required and found necessary,
Chief Engineer (CSQ)/QA Unit's objections records of Central Technical Examiner/Chief
on overpayments and defective work, Engineer (CSQ)/QA Unit's objections on
reports of C.B.I./S.P.E. or the Vigilance Unit overpayments and defective work, reports of
of the Department may be consulted and C.B.I./S.P.E. or the Vigilance Unit of the
their assistance availed of. Department may be consulted and their
assistance availed of.
53. 35.12 Default of a party 35.11 Default of a party
54. 35.13 Issue of award
(1) Whenever an award is made by an Deleted
Arbitrator appointed otherwise than
through a Court, and if under the award
some money is payable to the
Government by the contractor, the
Executive Engineer should first supply to
the Arbitrator stamped paper of
appropriate value as may be asked for by
the Arbitrator according to amount of the
award as per the rules of the State where
the award is likely to be made by the
Arbitrator, and request the Arbitrator to
write the award on the stamped paper
(non-judicial) so supplied to him.

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 (2) It is open to objection in a Court of law to
write the award on ordinary paper and
afterwards rewrite it on the stamped
paper. The award should, therefore,
always be obtained on stamped paper. It is
for the Arbitrator to say as to which
party should supply the stamped paper
in such cases.
(3) As per the provision in the arbitration
clause, in all cases where the total
amount of all the claims in dispute is Rs.
One lakh and above, the Arbitrator shall
have to give the reasons for the award.
55. 35.14 Filing of award 35.12 Decision on the award
56. 35.13 Acceptance/Challenge of award
(3)
The table shall be replaced by the following
Sr. Authority to accept/ By EE to SE By SE to CE Action by CE
No. challenge the award
1 CE 15 days from the 10 days. The SE The CE will take decision
date of receipt of shall offer his about accepting or
award or from the specific comments challenging the award
date of disposal of about acceptance within 20 days after
application filed u/s or challenging receipt of case from SE
33 of Arbitration award against
Act. each claim.
2 ADG 15 days from the 5 days. The SE The CE will submit the
date of receipt of shall offer his case to ADG within 10
award or from the specific days of receipt from SE
date of disposal of comments about with his specific
application filed u/s acceptance or comments about
33 of Arbitration challenging accepting/ challenging
Act. award against award against each
each claim. claim. The ADG will take
decision about
accepting or
challenging the award
within 15 days

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 3 SDG/DG -do-
57. 35.16 Setting aside of the award
(1) The question of challenging the arbitral
award in a Court of law should be
considered very carefully.
Under section 34 of Arbitration and
Conciliation Act, 1996, there are very
few grounds available to challenge the
arbitral award as follows:
(a) The party making the application
furnishes proof that:
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid
under the law to which the parties have
subjected it or, failing any indication
thereon, under the law for the time being
-do- Within 10 days of receipt
from SE, the CE will
submit the case to the
SDG/DG under
intimation to ADG/SDG
who will send his
comments to SDG/DG
within 10 days. The
SDG/DG will take
decision about
accepting or
challenging the award
within 15 days
35.14 Setting aside of the award
(1) The question of challenging the arbitral award
in a Court of law should be considered very
carefully.
Under section 34 of Arbitration and
Conciliation Act, 1996, there are very few
grounds available to challenge the arbitral
award. Hence the authority deciding to
challenge an arbitral award must record in
writing the specific grounds for challenge
under s.34 of the Act, to ensure that there is
no frivolous litigation. Also a separate
Application for stay against the award is
required to be moved in case the award is to
be challenged and notice of such challenge
has to be given to the other party before
filing the same before the court as per
amended Arbitration Act. It must be
ensured in consultation with the Govt
counsel that in case of challenge, the same
is filed with complete set of documents to
avoid refiling and difficulty in case of bar of
limitation if original filing is considered as
not properly made and without vital
documents.
Deleted
Page 48 of 54
 in force, or
(iii) the party making the application was
not given proper notice of the
appointment of an Arbitrator or of the
arbitral proceedings or was otherwise
unable to present his case, or
(iv) the arbitratal award deals with a
dispute not contemplated by or not
falling within the terms of submission to
arbitration, or it contains decision on
matters beyond the scope of submission
to arbitration, provided that, if the
decision on matters submitted to
arbitration can be separated from those
not submitted, only the part of the
arbitral award which contains decisions
on matters not submitted to arbitration
may be set aside, or
(v) the composition of the arbitral tribunal
or arbitral procedure was not in
accordance with the agreement of the Deleted
parties, unless such agreement was in
conflict with a provision of this Part from
which the parties cannot derogate, or
failing such agreement, was not in
accordance with this Part, or
(b) The Court finds that:
(i) the subject matter of the dispute is not
capable of settlement by the arbitrator
under the law for the time being in
force, or
(ii) the arbitrate award is in conflict with
the public policy of India.
(2) An application for setting aside an
arbitration award may not be made after Deleted
3 months have elapsed from the date on
which the party making that application
had received that arbitral award or from
the date on which his application for
correction in or interpretation of
arbitration award in terms of Section 33 of
the Arbitration and Conciliation Act,
1996 was disposed of by the Arbitral
Tribunal/ Arbitrator. Under Section 33, a
party can make an application for
correction or interpretation within 30

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 days of receipt of the arbitration award.
(3) If the award is found to be in order from Deleted
all aspects, it need not and should not
be challenged. In cases, where, in the
opinion of authority competent to
accept/challenge the award, there are
good grounds available to challenge the
award (whole or part), Ministry of Law
should be consulted.
(4) The following documents may be sent (2) The following documents may be sent
invariably with all awards: invariably with all awards:

58. 35.17 Award amount not to be deposited in 35.15 Award amount to be paid if there is no stay
court on the award
Liability to pay further interest does not Deleted
ceases even if award amount is deposited in
court. Therefore in case of challenge to the
award, the award amount should not be
deposited in the court unless otherwise directed
by the court.
The award amount is to be paid even if the
award is challenged for arbitration under the
amended law in 2015 unless a stay is obtained
through a separate Application. Even then the
court may ask to deposit security for granting a
stay. In deposit work the client should be kept in
loop regarding arbitration and the MoU should be
clear about liability of client for arbitration award.
59. 35.18 Period of Limitation 35.16 Period of Limitation
(1) It is a term of the contract in the relevant
arbitration clause that if the contractor
does not make any demand for Deleted
arbitration in respect of any claim (s) in
writing within 120 days of receiving of
intimation from the Government that the
bill is ready for payment, the claim of the
contractor (s) will be deemed to have
been waived and absolutely barred from
the liabilities under the contract in
respect of these claims.
(2) In spite of the above specific provision in
the arbitration clause, the Chief Engineer Deleted
should not withhold appointment of
Arbitrator on the ground that the request
was received after the expiry of the
specified period mentioned in the relevant

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 arbitration clause of the agreement, but
should appoint the Arbitrator clarifying in
the letter of appointment of the
Arbitrator that the reference is without
prejudice to the defence that may be
raised by the Government regarding the
tenability of the claim on all necessary
and available grounds including those of
limitation, and the parties to the
agreement will be free to raise the
question of limitation before the
Arbitrator.
(3) While examining the request for (1) While examining the request for arbitration
arbitration from a contractor or supplier from a contractor or supplier or any claim in a
or any claim in a litigation case, the litigation case, the Executive Engineer should
Executive Engineer should examine examine whether the claim of the contractor
whether the claim of the contractor is is time barred, in accordance with the
time barred, in accordance with the provisions of the Limitation Act, 1963. This
provisions of the Limitation Act, 1908 or point should be taken into consideration in
1963 as the case may be. This point preparing the defence.
should be taken into consideration in
preparing the defence.
(4) The question as to whether any dispute deleted
has become time barred will itself be a
dispute which can only be settled by
arbitration. The stage of reference is not
concerned with the question whether the
claim of the party to the arbitration
agreement is barred by the Law of (2) Limitation for a claim, a counter claim and a
Limitation and that question falls within set off are different and must be considered
the province of the Arbitrator to whom the against each claim, counter claim or set off
dispute is referred. The reference of the claimed. The FIRST DIVISION for SUITS of the
disputes, even though seemingly time Limitation Act is applicable for limitation for
barred, would therefore be made to the commencement of arbitration. S.21 of the
Arbitrator. The parties would be free to Arbitration and Conciliation Act determines
agitate the question of time bar before limitation for claim but not for a counter
the Arbitrator, who would no doubt claim, for which limitation is considered
consider this point and give his award. when the counter claim is filed before the
However, it can be clarified in the letter arbitrator.
of appointment of the Arbitrator that the
reference is without prejudice to the
defence that may be raised by the
Government regarding the tenability of
the claim on all necessary and available
grounds including those in limitation.
(5) An appeal before the Division Bench is to (3) An appeal before the Division Bench is to be

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 be filed within thirty days of filed within thirty days of pronouncement of
pronouncement of judgment by the High judgment by the High Court. If for any reason a
Court. If for any reason a delay occurs, delay occurs, the Court has to be approached
the Court has to be approached for for condonation of delay in filing the appeal,
condonation of delay in filing the appeal, and the Department has to explain the day-to-
and the Department has to explain the day delay to the satisfaction of the Court. Every
day-to-day delay to the satisfaction of the care should, therefore, be taken in handling
Court. Every care should, therefore, be such arbitration/court cases, and it should be
taken in handling such arbitration/court ensured that timely and prompt action is
cases, and it should be ensured that taken within the period of limitation.
timely and prompt action is taken within
the period of limitation.
(4)Often mistakes are made, despite engaging
legal counsels from ministry of law,
regarding the jurisdiction of courts in
arbitration matters and particularly in
challenge of arbitral award with adverse
consequences. S.42 of the Arbitration Act
shall confer jurisdiction only in one court, if
the same has been approached earlier, but
not due to previous Application under s.8 for
reference to arbitration. Hence the proper
advice must be obtained in each fact of case
and the location from the legal counsel by
giving full facts of history of case to avoid
unnecessary litigation in wrong forum.
As per judicial precedent the court at the
seat of arbitration as well as the place
involving subject matter of disputes shall
have jurisdiction in arbitration. Where a
High Court has original jurisdiction, it shall
be the ‘Court’ for arbitration even in
domestic arbitration. The procedure in court
proceedings may depend on whether the
arbitration is as per un-amended Act or
amended Act in 2015. The Commercial
Courts, the Commercial Divisions and
Commercial Appellate Division, where set
up, shall have jurisdiction as per specified
value of dispute.
60. Annexure Proforma For
Hindrance Register
[Reference para 29.5(3)]

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 SI. Nature Items of work Date of Date of Over-lapping Net hind- Sign. of Sign. Remarks
no. of hind - that could not start of removal period, If any rance in AEs of EE of
rance be executed hind- of hind- days Review
due to this rance rance ing
hindrance Officer

1 2 3 4 5 6 7 8 9 10

61. Section 35 Annexure-I Deleted

62. Appendix-1 Sl. No. 12 Deleted
63. Appendix 32 Deleted

Appendix 33 Deleted
64. APPENDIX– 34A
(Reference para 35.6)
Model form of letter of appointment of First Arbitrator
CENTRAL PUBLIC WORKS DEPARTMENT
No. Dated, the …………….20……..

Subject: In the matter of arbitration between ……………. and Union of India, regarding the work
……………………………..Agreement no. ………………….

Whereas…………………….has/have written to me vide his/their letter no………….………

dated…………. that certain disputes have arisen between the above noted parties in respect of the
above noted work. I, ………………,(Designation), CPWD by powers conferred on me under Clause 25 of
the said Agreement hereby appoint Shri …………. (Address and Contacts) as the first Arbitrator in a
panel of three Arbitrators to decide and make their award regarding the claims/disputes which shall
be referred upon appointment of the Presiding Arbitrator by the contractor, if any, as shown in the
statements enclosed subject always, however, to their admissibility under clause 25 of the aforesaid
agreement.

The first Arbitrator and the second Arbitrator, to be appointed by the contractor, shall appoint the
Presiding Arbitrator within prescribed time from appointment of the second Arbitrator in terms of
the Arbitration Agreement, copy of which is enclosed, failing which action under the Arbitration
Agreement shall be taken without further notice.

Appointing Authority
Enclosed: Certified copy of Arbitration Agreement (e.g. Clause 25 of GCC 7/8)
To
1. Shri…………………………………. (Arbitrator)

2. M/s ………… Contractor, with reference to his/their letter no. … dated …. They are requested to
intimate appointment the second Arbitrator in terms of the Arbitration Agreement within the
prescribed time failing which action under the Arbitration Agreement shall be taken without

Page 53 of 54
 further notice.

Copy to:
1. Superintending Engineer/PM/CPM ….. as applicable.
2. Executive Engineer …. with reference to his letter no. ... dt. …

Arrangements may please be made to defend the case effectively. Legal assistance of the Counsel/
Superintending Engineer (P) may be obtained where necessary.
Superintending Engineer/Executive Engineer should ensure that the bills of the contractors are
finalised immediately, if not already done.

Superintending Engineer (C&M)

Issued from file No. CSQ/CM/16(1)/2017

1. All Spl. DGs, ADGs, CPWD, E-in-C, PWD, Delhi Govt. They are requested to endorse a
copy of this O. M. to all CEs, SEs & EEs.

Executive Engineer (M)

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